Answer: dividends fluctuating with earnings in the short term.

## Explanation Under a **constant dividend payout ratio policy**, companies pay out a fixed percentage of earnings as dividends each period. This means: - **Dividends fluctuate with earnings**: When earnings increase, dividends increase; when earnings decrease, dividends decrease - **Short-term volatility**: Dividends become more volatile in the short term as they directly follow earnings fluctuations - **More uncertainty**: Shareholders face greater uncertainty about future dividend payments In contrast, a **stable dividend policy** aims to maintain relatively constant dividend payments regardless of short-term earnings fluctuations, providing more predictability for shareholders. **Option A** describes a residual dividend policy where companies gradually adjust toward a target payout ratio over time. **Option C** is incorrect because constant payout ratio actually creates more uncertainty about future dividends, not less. **Therefore, Option B is correct** - a constant dividend payout ratio policy would most likely result in dividends fluctuating with earnings in the short term.

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